TMI Blog2015 (7) TMI 91X X X X Extracts X X X X X X X X Extracts X X X X ..... consideration by setting aside the orders of the High Court passed in each of the cases before it and restoring the view taken by the learned Appellate Commissioner as affirmed by the learned Tribunal. - Decided in favour of assessee. - CIVIL APPEAL NO. 731 OF 2007 - - - Dated:- 1-7-2015 - RANJAN GOGOI and PINAKI CHANDRA GHOSE, JJ. WITH CIVIL APPEAL NOs.729 OF 2007, 733 OF 2007, 736 OF 2007, 737 OF 2007, 738 OF 2007, 740 OF 2007, 741 OF 2007, 6008 OF 2007, 6016 OF 2007, 6023 OF 2007, 925 OF 2008, 1239 OF 2008, 1240 OF 2008, 1514 OF 2008, 1515 OF 2008, 1516 OF 2008, 1517 OF 2008, 1518 OF 2008, 1519 OF 2008, 1520 OF 2008, 1521 OF 2008, 1522 OF 2008, 1523 OF 2008, 1524 OF 2008, 1527 OF 2008, 1528 OF 2008, 1529 OF 2008, 1531 OF 2008, 1532 OF 2008, 1533 OF 2008, 1535 OF 2008, 2008 OF 2008, 2012 OF 2008, 4321 OF 2008, 7226 OF 2008, 7227 OF 2008, 7230 OF 2008, 2794 OF 2009, 2795 OF 2009, 2796 OF 2009, 2797 OF 2009, 1722 OF 2010 AND CIVIL APPEAL NO. 6174 OF 2010 JUDGMENT RANJAN GOGOI, J. 1. The issue that arise for consideration in this group of appeals is common and may be summarized as follows. Whether the amounts paid by the ONGC to the non-resident asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ati for the assessment year 1985-86 and the drilling rig Sagar Ratna for the assessment year 1986-87. Faced with the different views taken by the authorities under the Act, as mentioned above, the High Court proceeded to analyse the different clauses of the contract between the parties. A consideration of such analysis made by the High Court would go to show that it had come to light before the High Court that the contract between the parties visualized operation of the oil rigs including drilling operations by the personnel made available under the contracts/agreements, which fact was further stated on affidavit before the High Court by an authorized official of the ONGC in the following terms. That under the said agreement, Foramer was required, through its personnel listed in Exhibit-A to the said agreement, to carry out inter-alia the drilling operations specified in clause 4.3 to 4.10 of the said agreement. Despite the above, the High Court took the view that under the agreement payment to M/s. Foramer France was required to be made at the rate of 3450 USD per day and that the contract clearly contemplated rendering of technical services by personnel of the non-resi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of services and facilities in connection with, or supply of plant and machinery on hire used, or to be used in the prospecting for, or extraction or production of mineral oils outside India. [(3) Notwithstanding anything contained in sub-section (1), an assessee may claim lower profits and gains than the profits and gains specified in that sub-section, if he keeps and maintains such books of account and other documents as required under sub-section (2) of section 44AA and gets his accounts audited and furnishes a report of such audit as required under section 44AB, and thereupon the Assessing Officer shall proceed to make an assessment of the total income or loss of the assessee under sub-section (3) of section 143 and determine the sum payable by, or refundable to, the assessee.] Explanation.-For the purposes of this section,- (i) plant includes ships, aircraft, vehicles, drilling units, scientific apparatus and equipment used for the purposes of the said business; (ii) mineral oil includes petroleum and natural gas.] 44D. Special provision for computing income by way of royalties, etc., in the case of foreign companies.- Notwithstanding a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ofession carried on by such person outside India or for the purposes of making or earning any income from any source outside India; or (c) a person who is a non-resident, where the fees are payable in respect of services utilised in a business or profession carried on by such person in India or for the purposes of making or earning any income from any source in India : [Provided that nothing contained in this clause shall apply in relation to any income by way of fees for technical services payable in pursuance of an agreement made before the 1st day of April, 1976, and approved by the Central Government.] [Explanation 1.-For the purposes of the foregoing proviso, an agreement made on or after the 1st day of April, 1976, shall be deemed to have been made before that date if the agreement is made in accordance with proposals approved by the Central Government before that date.] [Explanation 2.-For the purposes of this clause, fees for technical services means any consideration (including any lump sum consideration) for the rendering of any managerial, technical or consultancy services (including the provision of services of technical or other personnel) bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ices. However, the later part of the explanation excludes from consideration for the purposes of the expression i.e. fees for technical services any payment received for construction, assembly, mining or like project undertaken by the recipient or consideration which would be chargeable under the head salaries . Fees for technical services, therefore, by virtue of the aforesaid explanation will not include payments made in connection with a mining project. 9. Before the High Court, a Circular No. 1862 dated 22.10.1990 having a bearing on the subject was placed for consideration by the appellant-assessee. The aforesaid instruction may be conveniently reproduced herein below. Subject: Definition of fees for technical services in Explanation to Section 9(1) (vii) of the Income Tax Act, 1961 whether prospecting for or extraction of production of mineral oil are mining operations-clarification regarding. The expression fees for technical services has been defined in Explanation 2 to Section 9(1) (vii) of the Income Tax Act, 1961 as under: Explanation 2.-For the purposes of this clause, fees for technical services means any consideration (including any lum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s directly and inextricably linked with the prospecting, extraction or production of mineral oil. It is submitted on behalf of the appellants that the agreements in question satisfy the above test for which purpose the appellants have categorized the different contracts under 8 heads which may be conveniently set out at this stage hereinbelow. 1. Carrying out seismic surveys and drilling for oil and gas 2. Services starting/re-starting/enhancing production of oil and gas from wells 3. Services for prospecting for exploration of oil and or gas 4. Planning and supervision of repair of wells 5. Repair, Inspection or Equipment used in the exploration, extraction or production of oil and gas 6. Imparting Training 7. Consultancy in regard to exploration of oil and gas 8. Supply, Installation, etc. of software used for oil and gas exploration 11. It is also urged on behalf of the appellants that the instruction/Circular dated 22.10.1990 issued by the CBDT was binding on the primary authority on the ratio of the decision of this Court in K.P. Varghese Vs. Income Tax Officer, Ernakulam and Others (1981) 4 SCC 173. It has been further point ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsel for the revenue has even suggested that if it is held that the High Court ought to have examined each agreement or contract to find out its real purpose and intent the revenue would have no objection if the matters are remanded for a complete exercise to be made on the above basis. 13. The Income Tax Act does not define the expressions mines or minerals . The said expressions are found defined and explained in the Mines Act, 1952 and the Oil Fields (Development and Regulation) Act 1948. While construing the somewhat pari materia expressions appearing in the Mines and Minerals (Development and Regulation) Act 1957 regard must be had to the provisions of Entries 53 and 54 of List I and Entry 22 of List II of the 7th Schedule to the Constitution to understand the exclusion of mineral oils from the definition of minerals in Section 3(a) of the 1957 Act. Regard must also be had to the fact that mineral oils is separately defined in Section 3(b) of the 1957 Act to include natural gas and petroleum in respect of which Parliament has exclusive jurisdiction under Entry 53 of List I of the 7th Schedule and had enacted an earlier legislation i.e. Oil Fields (Regulation and Developm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ling, furnishing personnel for manning, maintenance and operation of drilling rig and training of personnel. 3. 731 Drilling, furnishing personnel for manning, maintenance and operation of drilling rig and training of personnel. 4. 1722 Furnishing supervisory staff with expertise in operation and management of Drilling unit. 5. 729 Capping including subduing of well, fire fighting. 6. 738 Capping including subduing of well, fire fighting. 7. 1528 Analysis of data to prepare job design, procedure for execution and details regarding monitoring. 8. 1532 Study for selection of enhanced Oil Recovery processes and conceptual design of Pilot Tests. 9. 1520 Engineering and technical support to ONGC in implementation of Cyclic Steam Stimulation in Heavy Oil Wells. 10. 2794 A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 28. 1521 Inspection of gas generators. 29. 1515 Inspection of rigs. 30. 2012 Inspection of generator. 31. 1240 Inspection of existing control system and deputing engineer to attend to any problem arising in the machines. 32. 1529 Inspection of drilling rig and verification of reliability of control systems in the drilling rig. 33. 2008 Expert advice on the device to clean insides of a pipeline. 34. 2795 Feasibility study of rig to assess its remaining useful life and to carry out structural alterations. 35. 925 Engineering analysis of rig. 36. 1519 Imparting training on cased hold production log evaluation and analysis. 37. 1533 Training on well control. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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